Public interests or personal interests?

By Correspondent

18th March 2012

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For eight months now the debate about privatization of the Dar es Salaam transport firm, Usafiri Dar es Salaam or UDA in short, has attracted media attention as well as politicians and key policy makers.

Some legislators, especially from Dar es Salaam region, see the decision to allow UDA’s shares to be bought by a little known company, Simon Group, over the counter wasn’t driven by public interests.

Others, mainly those who engineered the privatization process, affirm that the move was conducted according to procedure and blessed by the Board of Directors, which represents shareholders.

Since the UDA issue emerged in Parliament in July last year, three Dar es Salaam legislators have strongly campaigned for the termination of the contract signed between the current investor, Simon Group Ltd and the transport firm.

But the matter took a new twist when two weekly newspapers, The East African published in Nairobi, and Mwanahalisi, published in Dar es Salaam, claimed that some of those lawmakers currently calling for the suspension of the new investor were doing so not because of the public interest, but for personal interests.

According to assertions by the two weeklies, personal interests were placed above public interests, with some leaders acting as ‘surrogates ’ for a third party who has vested interests in cash-strapped UDA, thus providing the reason for the current battle.

The third party was identified as none other than Quality Group---a city-based real estate firm with close connections to banks and developers in Nairobi and elsewhere.

The twist didn’t end there. Last week, company chief executive Yusuf Manji issued a strongly worded statement accusing Simon Group Ltd of trying to use Quality Group as a ‘shield’ against recent attacks directed to the investor by some Dar legislators.

The statement published as an advert as well as a news story also questioned how Simon Group won the tender, intoning that the company should explain to the public how the bidding was done, instead of trying to shift the blame to Quality Group.

In its response, Simon Group placed an advert in some tabloids, which among other things qualified Manji’s assertions as false, driven mainly by malice after the latter failed to succeed in its August 2007 bid to acquire UDA’s shares at a price of Sh1.5 billion.

Simon Group’s statement made it clear that it acquired the shares through a thorough process, documented by both sides and blessed by the Board of Directors.

In its response, Simon Group wanted Manji to ask himself why he didn’t win the tender, instead of wasting his time to question how the company acquired the 51 percent stakes over the counter.

We also learn that one of the bidders in the 2007 bidding process but failed to win the UDA privatization tender, wrote a letter first to the Consolidated Holdings Corporation(CHC) seeking clarification on why it wasn’t awarded the tender, despite the fact that it was the sole bidder.

The very same company also wrote a letter this year to two Parliamentary Committees, one for public accounts chaired by Zitto Kabwe and another finance and economy chaired by Dr. Abdallah Kigoda, seeking the intervention of the two in the current UDA privatization saga. Both letters were written in January, on the basis of documents seen by the Guardian on Sunday.

The letters maintain that the previous attempt by the company to get clarification wasn’t answered by CHC. The company further claims that even during its 2007 bid, it didn’t get a reply on whether it won or lost the tender. Everything went quietly.

“We have learned via the media that UDA has been privatised via the sale of 51% unallocated shares in UDA to M/S Simon Group Limited (SGL) and we write to you because CHC, the successor of PSRC is charged with the liquidation of public enterprises, divestitures, monitoring and evaluation of privatised entities among other responsibilities,” read part of the letter from Quality Group written on July 21, 2011.

Among other things, the letter stated that Quality Group submitted its bid to acquire 49 percent in UDA’s stakes to the defunct PSRC on August 15 2007, but despite being the sole bidder, the company wasn’t awarded the tender.

This letter was written a week before the UDA dispute was raised by Dar es Salaam lawmakers, including Musa Azzan ‘Zungu,’ Iddi Azzan and Abbas Mtemvu. The timing of this letter, and the parliamentary debate about UDA, bring up more questions than answers.

In the letter signed by Manji directed to Methusela Mbajo, Quality Group wanted CHC to clarify why its bid was rejected, but by extension why it facilitated Simon Group to acquire shares in UDA without due care to divestiture procedures.

Looking only at the headlines, UDA’s privatisation had vast attraction and the magnitude of how it rocked the National Assembly mid last year was equally massive. The truth remains very clear, however, that the revelation that Manji also placed an unsuccessful bid to acquire UDA shares brought a new twist on the matter.

Following this revelation by Manji himself through the advert published by newspapers two weeks ago, it’s now clear that the battle between the control of UDA’s stakes is between Simon Group Ltd and Quality Group Ltd.

The Guardian on Sunday has established that after many attempts by investors to buy UDA’s shares failed to yield positive results, the Board of Directors was annoyed because it spent so much energy and resources, hoping to get the shareholder only to be duped at the last meeting.

According to the documented details, UDA’s Board of Directors under the chairmanship of Iddi Simba decided that any serious investment who was eyeing the transport firm should prove that he or she was serious to avoid the previous failures.

It’s on this grounds that when the little known company, Simon Group Ltd, expressed its willingness, to invest in the cash-strapped transport firm, the Board of Directors first of all wanted a commitment fees, business plan, company profile, and financial capability.

According to the details gathered by the Guardian on Sunday, when all these were submitted, the Board still decided to commission an independent consultant, to conduct a due diligence analysis about the potential bidder in order to establish whether the firm was a credible investor, or just another ‘ghost’ company.

In this case we are told that a local consultant firm, Daima Associates, was commissioned to undertake due diligence about Simon Group’s capability to invest in the cash-strapped firm, and finally, the report came out that it was capable of doing so, and thus it could acquire the shares.

According to available details, during the due diligence study, the consultant visited Simon Group’s businesses in Mwanza, Shinyanga and Dar es Salaam as well as talking to some local banks in order to establish the financial profile and capacity of this little known firm.

After all parties were satisfied, the deal went ahead, and the new investor invested about Sh1.2billion as initial capital, promising to dole out more funds in future including acquiring modern buses to improve UDA’s capacity to do business in Dar es Salaam.

At present, according to Simon Group, about 30 modern buses have been purchased and registered ready to operate in Dar es Salaam, but since the wrangling was still going on, nothing has so far taken place. All these 30 buses are parked at Kurasini yard as various groups with vested interests continue to fight for the control of the now purchased firm.

Dar es Salaam MPs have claimed that the money used to purchase those 30 buses came from UDA’s account, and not from Simon Group Ltd.

In a business sense, since Simon Group acquired the 51 percent by investing initial capital of Sh1.2 billion, and it continued to oversee the company’s operation including paying all salaries, taxes and other operational cost, it’s not clear why the MPs are trying to make the Sh1.2bn investment UDA property and not Simon Group money, which was used to buy the 30 new buses.

The business procedures are very clear. After acquiring majority shares in UDA, Simon Group Ltd became the key operator in daily operationa of the transport firm, but in collaboration with the Dar es Salaam City Council, which is also the other shareholder.

Therefore if Simon Group and Dar City Mayor, Didas Masaburi, authorised the withdrawal of about $100,000 from UDA’s account, which was then used to buy the 30 new buses, why all the fuss?

According to the Memorandum of Understanding signed in tripartite, Simon Group is recognised as one of three shareholders, whereby under this document, the new investor is regarded as the main shareholder until proved otherwise by a new CHC evaluation.

One thing that the critics of this deal have raised is that the tender wasn’t advertised as stipulated in Public Procurement Act of 2004, and there was wasn’t any competitive bidding that finally gave Simon Group a win to take over majority shares in UDA.

In responding to this query, Simon Group stated that the process was done over the counter, which is also allowed under normal procedure, and therefore the process didn’t infringe procedure or regulations as claimed by critics.

In 2006/7 when Air Tanzania Co. Ltd was in financial crisis after ending its partnership with South African Airways, the government allowed an investor from China to take over shares over the counter without announcing a tender.

Though the partnership didn’t work, it was initially done through similar arrangements used by the UDA Board of Directors in its share sale to Simon Group.

Whether this process is contrary to what the legislation explicits foresees is something that corporate lawyers should help the public to figure out, as to where the truth lies.

According to bidding regulations, you don’t qualify simply because you are a sole bidder or the highest bidder. There are various factors that determine who wins and why in the bidding process.

In the UDA case we are told that in 2007, Quality Group was the sole bidder, but its tender didn’t go through. The company now wants to know why it didn’t win the tender.

What are the rules? Is it a must for a bidder to be informed about why it didn’t win? Can you win simply because you are the highest bidder? Can you win simply because you are the sole bidder?

One corporate lawyer who declined to be named citing his business interests told the Guardian on Sunday, “being a sole bidder or highest doesn’t give you a guarantee to win any tender…there are no binding rules that the bidder should be informed about why he or she lost the tender.”

Who is Simon Group?

In a close follow up of all the fuss about UDA’s privatization, the question that emerges especially from the critics is who is Simon Group? Who are these people who have the guts to beat the ‘big brothers’ of Dar es Salaam?

This question reminds us what former Italian Prime Minister Silvio Berlusconi said about US President Barack Obama soon after the latter was elected the first black President: “He has been elected, yes, but he is not one of us.”

What does this mean? You might have won but you are not one of us because you either don’t belong to the elite (white supremacy) and you are simply a black guy with African origins.

Winning businesses in a fragile and corrupt city like Dar es Salaam, if you are nobody, raises more questions than answers. This is because we have created a system where people inherit deals, political posts and wealth whereby for an outsider - if you want to be on the safe side - you either join these groups or pay them for protection.

“There’s a small group of tycoons that controls lucrative government tenders and deals…in return this group finances some politicians during elections in order to have powerful loyalties in the corridors of power,” one MP told the Guardian on Sunday.

Simon Group was a little known and so was his founder, Robert Kisena, a young entrepreneur from Shinyanga. Many people I talked to were convinced that the young man is not alone and there must be powerful sleeping partners behind the scenes.

This being the case, the problem might not be the process, but Simon Group because like Berlusconi put it, ‘he is not one of us’ though he has made some fortunes.

This problem is not only facing those doing business but even those aspiring to join politics in a metropolitan environment like Dar es Salaam. There are those who see themselves as indigenous, while others are described as ‘newcomers’ or upstarts.

Public interests or personal interests?

Another question that has clouded the ongoing wrangle about UDA’s privatization is whether the critics are driven by public interests or personal interests.

The biggest challenge for many people is where to draw the demarcation between personal interests and public interests. For instance if during your election as a legislator, you were heavily financed by a certain businessman, where do you stand the next day when your financier is involved in a fight with a third party?

Even if you have genuine concern, but since one of the parties involved in the fight you are involved financed you during your election campaign, it will be very difficult for the public to believe your cause.

That’s why in many countries leaders of political parties as well as poll aspirants are required to disclose the details of those funding them during the campaign, so that the public can figure out the likely business connections.

In so doing, once there’s a burning issue involving a third party and one of your financiers, you can not be expected to be an honest broker between the two as the public knows where your loyalties are located. Tanzania needs this kind of disclosure to avoid mixing personal interests and public interests.

For instance one MP from Dar es Salaam said he was willing to see UDA dying, a natural death, instead of allowing Simon Group to buy shares in the cash-strapped transport firm.

This kind of stance reminds Tanzanians the statement issued by some MPs two years ago about Tanzania Electricity Supply Company’s bid to buy Dowans’ power generating plants, when the lawmakers said “they were ready to see Tanzania plunging into total darkness rathern than seeing the state owned power utility buying the plants.”

Finally, the country was plunged into total darkness last year and the very same MPs were also at the forefront demanding electricity at all costs even if that power came from Dowans’ plants they vehemently rejected a year earlier.

The Dar es Salaam MPs might have genuine concern, but since one of the interested parties in UDA’s privatisation is their best friend (not all of them) and a political ally, it’s then very challenging to understand whether their fight is driven by public interests or personal interests.

Why all the fuss?

Since the government has decided to re-evaluate the actual value of the company in order to establish whether the amount paid by the investor was the right price or not, there’s no need to shout loudly.

Following the situation, the fate of UDA and its associated sale of part of shares stands to face delays as the government had decided to carry out a second evaluation to establish the actual value of the company. The fresh evaluation would be conducted by the Consolidated Holding Corporation (CHC), the state body charged with overseeing public organisations listed for divestiture.

Shareholders: Dar es Salaam City Council, Simon Group Ltd and the government through the Treasury Registrar agreed in principle last December that the second evaluation should be done for the purpose of clearing the air over the much hyped malpractices and non-adherence to set procedures during the sale of UDA shares to Simon Group Ltd in February 2011.

According to the Memorandum of Understanding signed in tripartite, Simon Group is recognised as one of three shareholders, though there is no agreement as to who should be regarded as the main shareholder until the evaluation is concluded by CHC.

During the meeting which was a follow-up of another stakeholders’ meeting held on November 9, 2011 the parties agreed on the proposal tabled by Treasury Registrar that 49 percent owned by the government be sold to investor - Simon Group on top of the unallotted shares, which were under dispute.

Let CHC conduct this task without pressure from politicians or those with vested interests crying ‘wolf,’ that all their concerns are solidly in the public interest.